CAIIB RB Unit 8 - Credit and Debit Cards

Global Scenario

A credit card is a thin plastic card, usually 3-1/8 inches by 2-1/8 inches in size that contains identification information such as a signature or picture, and authorizes the person named on it to charge purchases or services to his account — charges for which he will be billed periodically.

1. The concept behind Credit Card is "Buy Now, Pay Later".
2. Credit Cards had their origin right from 1800s.
3. The first universal credit card that could be used at a variety of stores and businesses — was introduced by Diner's Club Inc., in 1950.
4. Another major universal card — "Don't leave home without it!" — was established in 1958 by the American Express Company.
5. The first national bank plan was BankAmericard, which was started on a statewide basis in 1959 by the Bank of America in California. This system was licensed in other states starting in 1966, and was renamed Visa in 1976.
6. Other major bank cards followed, including MasterCard formerly Master Charge.

Indian Scenario

1. Citibank and HSBC were the pioneers in the Indian credit card market in the 1980s.
2. Among the public sector banks, Andhra Bank, Bank of Baroda were the early starters followed by Bank of India.
3. Citibank, Standard Chartered Bank, State Bank of India, ICICI Bank and HDFC Bank dominate the credit card market with more than 90% market share.

Mainly credit cards are issued by banks in two formats viz.,

The proprietary format - banks issue the card in different brand names like Classic, Silver, Gold, Platinum, Titanium etc. Credit limits, cash withdrawal limits and other facilities will depend on the type of card.

The Co branded format - banks tie up with service providers like Hotels, Oil Companies, Airline Companies etc. and offer the cards as a co branded product with the brand name of the tied up company also embossed in the card.

Credit Scoring Module for credit cards consists of two parts.

Part I deals with the criterion to take a decision to issue a card or not.
Part II deals with the scoring for various parameters submitted by the applicant.

Charges

Finance Charges
Minimum Amount Due
Maximum Interest Free Period
Annualised Percentage Rate (APR)
Other Charges & Penalties

Debit Cards

Debit Cards explain the concept of "Buy Now and Pay Now".
When debit cards were introduced initially, they were marketed with sub brand names Electron (Visa), Cirrus (Master).But the Electron and Cirrus are not seen nowadays and simply issued as International Debit Card by both Visa and Master.

Prepaid Cards or Pre Loaded Cards

1. The card can be used by the bearer of the card only for purchases upto the amount loaded in the card.
2. No cash withdrawal is permitted in the card.
3. It is mainly intended as a Gift Card to be gifted to anybody.